The crisis that caused Beatbullying to collapse

For a decade, the anti-bullying charity has been winning plaudits for its work, but last month it went into voluntary liquidation amid allegations of financial mismanagement. By Andy Hillier

BeatBullying
BeatBullying

Beatbullying has been widely acclaimed since it was established as a charity in 2003, winning numerous awards for its innovative technology and its support services for young people in distress. In 2012, its websites received more than 1.7 million visits and counsellors ran almost 5,870 sessions with beneficiaries.

The charity was held in such high regard that when the Office for Civil Society awarded it £1.3m to expand its work three years ago, an event was held at the Cabinet Office in Whitehall with Nick Hurd, the charities minister at the time.

So it was a major shock when the Beatbullying Group, as it became in 2011, announced at the end of October that it had closed its websites and was looking for a buyer – the charity was also a company limited by guarantee. But no one came to the rescue and the charity was put into voluntary liquidation by the trustees on 6 November.

The charity says it has been advised not to discuss the circumstances that led to its sudden demise, but Third Sector understands from a range of sources that its financial difficulties appear to have arisen as a result of its ambitious recent expansion and a failure to attract funding for the future.

One commentator on the Third Sector website expressed astonishment that the BB Group had expanded its services so far beyond its core activity – for example, by starting a service called Cancer Care Online: "It should have been obvious that the sector is already packed with cancer care charities, most of them with helplines manned by people with expertise in specific cancers, and active and well-established forums."

The expansion appears to have accelerated in early 2011, when the charity received £285,500 from the Cabinet Office's Transition Fund to help it adapt for the future. The charity created We're Altogether Better, a group that included Beatbullying, its employment project Future You, the befriending scheme MiniMentors and CyberMentors, a project in which young people received advice on bullying from their peers.

In late 2011, We're Altogether Better was renamed the BB Group and received £1.3m from the Office for Civil Society's Social Action Fund to expand its work. Part of the money was used to create MindFull, a new online mental health service for young people, and to help develop Cosmo, its software platform for internet chat forums, and sell it to other charities.

The BB Group also secured more than £185,000 from the European Commission to roll out its model in six countries in Europe, and a further £196,500 from the Greek charitable funder the Stavros Niarchos Foundation to establish Beatbullying Greece.

It was an ambitious growth spurt, but by December 2012, its finances were looking shaky. Its accounts for the year showed that it had made a loss of £280,865 on an income of almost £2.4m and held no reserves. They say the loss was due to the late arrival of a payment of £223,553, overspending on Cosmo and other development costs. A note from its auditor, Sayer Vincent, said that the charity was nonetheless considered a going concern because in late 2013 it had secured loans and grants amounting to almost £550,000 from the Paul Hamlyn Foundation and the Cabinet Office; it had also been promised a minimum of £698,000 from ITV's 2013 Text Santa telethon appeal.

It was not the first time the charity had been in financial difficulty. Accounts for the year to December 2010 showed a loss of £259,000 after it expanded its operations and was hit by local and central government cuts. But it managed to turn things round by 2011, when it reported a surplus of almost £292,000.

Third Sector understands that the need to reduce expenditure reappeared in 2013, partly because the charity did not receive £300,000 it expected from a major funder in July. One former employee estimates that at least 14 staff, predominately from the MindFull and FutureYou teams, lost their jobs between April 2013 and January 2014. The source says that redundancies were handled poorly: "Staff found out in mass emails that close colleagues had been made redundant. More than once, staff members were assured that their teams were safe by line managers speaking in good faith, only to be laid off within days."

Regulator alerted

In 2013, the Charity Commission was also alerted to concerns about the charity's finances. A spokeswoman for the commission says that the concerns were put to the trustees, who "were able to reassure us as to the charity's finances and management". The commission decided that there was no need for further regulatory action.

Former employees have told Third Sector that, despite these financial difficulties, at least 14 new positions were created in 2014 and those recruited were led to believe that the charity was in a sound position. One former employee, who joined the charity earlier this year, says: "The finances seem to have been troubled since before I joined, but when I applied for the job I was given the impression that they had got a huge bit of funding and it was in a very good position."

Several former staff who have contacted Third Sector say the charity had a top-heavy management structure and operated in a chaotic and often dysfunctional way. One says: "At one point, one in three staff members at the BB Group headquarters was a head or director. This was justified in meetings as necessary for future expansion. However, this was during a time when a major programme closed, and multiple (predominantly junior) positions were made redundant due to that and subsequent funding issues."

The source claims that some staff were severely overworked, while others had little to do. Contractors were also brought in to work on projects, even when staff members had the capacity to carry out the work.

More than once, staff members were assured their teams were safe by line managers speaking in good faith, only to be laid off within days

The situation came to a head in August this year when a group of staff were called to a meeting to be told that their jobs were at risk and that they would receive only 85 per cent of their pay. Counsellors and moderators, who worked as contractors, were told that they would be paid only half of their salaries, according to sources.

In September, it was confirmed that staff who had been warned of redundancy would lose their jobs; they were told that their September pay would be cut by 10 per cent and they would not receive the remaining 15 per cent from August. Payments were not made as promised in the September pay run, but some money was later deposited into staff members' bank accounts. One former staff member says: "No warning was given and there was no communication whatsoever. Everyone was shocked and angry at the lack of communication and respect."

In October, the staff members affected did not receive any of the remaining money owed, according to one source, and the charity stopped replying to communications with staff. Within days of the charity saying publicly that it was experiencing financial problems, it filed a serious incident report with the Charity Commission, which is due to meet trustees shortly.

In November, the charity went into liquidation and the insolvency firm Antony Batty & Company was appointed. It is not clear how much money the charity owes or how many staff are affected – the 2012 accounts said it employed 44 and had more than 5,000 volunteers. But the charity did not own its own building and had few assets.

Future unclear

Aeguana, a software company that says it is owed about £75,000 by the charity and is claiming intellectual property rights to some of its technology, has told Third Sector that it is interested in talking to charities about forming a consortium and possibly making use of the technology. But it is not clear what the future holds.

One former employee feels most sorry for the beneficiaries and volunteers: "Lessons must be learned. We haven't been able to apologise to or support the young people we were working with because of the way the situation was managed."

Additional reporting by Susannah Birkwood and Andy Ricketts

The backers: Who has funded BB?

According to the Beatbullying Group's website, its funders included the innovation charity Nesta, which invested in its Future You scheme and was a primary backer of its Cosmo software; the European Commission's Daphne III Fund, which was funding its expansion in Europe; and the Social Investment Business, which gave the charity money from the Office for Civil Society's Social Action Fund to build the Cosmo framework and extend its work beyond anti-bullying advice.

Other backers included the social enterprise funder UnLtd, which helped the charity to create a social enterprise model; the Venture Philanthropy Foundation, which provided support from the voluntary sector; and the Department for Education, which funded a range of work, including the start-up of the CyberMentors scheme.

The Cabinet Office also provided Beatbullying with loans to allow it to develop its digital social action and volunteering model, and the Greek funder the Stavros Niarchos Foundation gave the charity money to establish Beatbullying Greece. The Nominet Trust, the Charities Aid Foundation and Hedge Funds Care also provided support. The Paul Hamlyn Foundation funded Positive Transitions, which supported children moving from primary to secondary school, and provided a loan to help with the charity's recent cash-flow problems. It also received about £850,000 from ITV's Text Santa 2013 telethon appeal.

Missed pay: 'There might be no money at all'

The staff of Beatbullying, who did not receive their full salaries in August, September and October, will almost certainly lose their jobs, but might be able to recover some pay, writes Annette Rawstrone. They numbered 44 in 2012, but the latest figure is unclear.

Doug Mullen, senior associate at Anthony Collins Solicitors specialising in employment law, says the process won't be quick: "They will not see any money this side of Christmas – it all depends how quickly the liquidation proceeds. It could easily be six months or more."

In the liquidation process, any money recovered goes first to liquidation expenses and secured creditors, such as HM Revenue & Customs. Next come preferential creditors, who include staff claiming for unpaid salaries, holiday pay and contributions to pension schemes. Claims are limited to the four months before insolvency and limited to £800 per person.

Other money owed to employees, such as for expenses and phone bills, is treated as unsecured debt and paid last. "It is possible that there will be no money at all for the unsecured creditors," says Mullen. "It depends on by how much it is insolvent, and quite a lot of money is typically eaten up by the liquidation costs."

If a former employee does not get any money from the liquidation, the National Insurance Fund will pay out, but this is limited to eight weeks of pay capped at £465 a week. It is also possible to recover up to six weeks of holiday pay and statutory notice pay at a week for each year of service, up to a maximum of 12 weeks, both also limited to £465 a week.

"I'd be astounded if employees get their full salaries back because the reality is that the charity is in liquidation because it can't pay its debts," says Mullen.

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